Reference no: EM13588885

Pedriani Company uses a job order cost system and applies overhead to production on the basis of direct labor cost. On January 1, 2014, Job No. 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $25,000; direct labor $15,000; and manufacturing overhead $20,000. Job No. 49 had been completed at a cost of $85,000 and was part of finished goods inventory. There was a $22,000 balance in the Raw Materials inventory account.

During the month of January, the company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were sold on account during the month for $118,000 and $125,000, respectively. The following additional events occurred during the month.

1. Purchased additional raw materials of $100,000 on account.

2. Incurred factory labor costs of $51,000. Of this amount $11,000 is related to employer payroll taxes.

3. Incurred manufacturing overhead costs as follows: indirect materials $3,000; indirect labor $12000; depreciation expense $19,000.

4. Assigned direct materials and direct labor to jobs as follows.

                        Job No.                        Direct Materials                      Direct Labor

                        50                                $ 7,000                                   $    6,000

                        51                                23,000                                       14,000

                        52                                20,000                                       11,000

5. The company uses direct labor cost as the activity base to assign overhead.

Instructions

(a) Calculate the predetermined overhead rate for the year 2014, assuming Pedriani Company Manufacturing estimates total manufacturing overhead costs of $750,000, direct labor costs of $200,000, and direct labor hours of 25,000 for the year.

(b) Open job cost sheets for Jobs 50, 51, and 52. Enter the January 1 balances on the job cost sheet for Job No. 50. (This can be done also when you get to parts d. and e.)

(c) Prepare the journal entries to record the purchase of raw materials, the factory labor costs incurred, and the manufacturing overhead costs incurred during the month of January.

(d) Prepare the journal entries to record the assignment of direct materials, direct labor, and manufacturing overhead costs to production. In assigning manufacturing overhead costs, use the overhead rate calculated in (a). Post all costs to the job cost sheets as necessary.

(e) Total the job cost sheets for Job 50 and Job 51 that were completed during the month. Prepare the journal entry to record the completion of these jobs during the month.

(f) Prepare the journal entries to record the sale of Job 49 and Job 50 during the month.

(g) What is the balance in the Work in Process Inventory account at the end of the month? What does this balance consist of? (For example which Job and what specific costs.)

(h) What is the amount of over- or underapplied overhead for the month?